EU's von der Leyen says three options or combination could finance Ukraine

BRUSSELS (Reuters) -European Commission President Ursula von der Leyen said in a letter to European Union governments on Monday that there are three options for meeting Ukraine's financing needs, including a loan using frozen Russian assets, but a combination of them is also possible.

European Union leaders agreed at a summit last month to meet Ukraine's "pressing financial needs" for the next two years but stopped short of endorsing a plan to use frozen Russian assets to fund a giant loan to Kyiv due to concerns raised by Belgium.

Leaders from all EU countries except Hungary asked the European Commission to come up with options for financially supporting Ukraine.

"We have identified three main options, i.e. support to be financed by Member States via grants, a limited recourse loan funded by the Union borrowing on the financial markets, or a limited recourse loan linked to the cash balances of immobilised assets," von der Leyen said in the letter, seen by Reuters.

In an options paper attached to the letter, von der Leyen added that "the three options are not mutually exclusive. They can be combined or sequenced".

"Given the urgency of the situation, varying complexity of the options, and the need to start disbursements by the second quarter of 2026, any selected option could be designed as transitional and time limited," the options paper said.

As one example, the paper said the option of non-repayable support financed by member countries and the option of EU borrowing on the financial markets "could serve as bridging solutions" until the bloc's new long-term budget, which comes into effect in 2028, is adopted and could serve as a guarantee for EU-funded loans.

In her letter, Von der Leyen told European capitals that a quick decision is needed.

"It will now be key to rapidly reach a clear commitment on how to ensure that the necessary financing for Ukraine will be agreed at the next European Council meeting in December," she said.

(Reporting by Lili Bayer; Editing by Andrew Gray)